Marginal Costs of Building Energy Retrofit

The aim of decarbonizing the economy implies taking action in several areas, one of which is the building industry. Users are likely to benefit from the transition to green buildings in multiple ways, such as lower energy bills as well as higher healthiness and perceived comfort. Nonetheless, those benefits come at a cost. Indeed, property owners must incur substantial capital expenditures to build new high-efficiency constructions or to refurbish outdated ones. While the economic benefits of green buildings have been deeply addressed in the literature over the last two decades, much less attention has been paid to the related costs. This study aims to widen the knowledge about the marginal costs of improving energy efficiency in residential properties. Three detached houses and four to five energy efficiency measures are analyzed. Once the costs are computed through bills of quantities, the energy performance indices and the energy rating bands are identified. We find a substantial gap between the marginal cost curve drawn based on the latest figures and the same curve drawn according to a survey conducted in the late 2000s. The changes in technical standards for calculating building energy performance in the mid-2010s explain almost half the gap. The latest technical standard introduced the novelty of the so-called reference building, a fictitious building sharing the same overall shape but meeting minimum mandatory requirements. That approach has attracted criticism due to supposed flaws and side effects. Here, we show that it also makes building energy efficiency targets much less affordable.